Devkota argues that even though the country has transitioned to federalism, the central government has not fully decentralized the power of development and construction to the local and state governments as outlined in the constitution. “Even small-scale projects are handled by the center. The central government continues to retain control and does not delegate budget or staff to the provincial and local levels,” he said, adding that it will be impossible to increase capital expenditure without increasing capacity by delegating staff and budget to lower levels.
Budgets are allocated without any proper planning or preparing a detailed project report (DPR). This has resulted in a lack of capital expenditure. Additionally, issues with land acquisition further hinders the ability to increase spending. The government's capital expenditure has been only 14.05% of the target in the first six months of the current fiscal year 2022/23. Till the end of January, the government has managed to spend Rs 53.45 billion. The inability to improve capital expenditure has resulted in frequent halting of development and construction projects. It has been observed that the government tends to spend a majority of the capital budget at the end of the financial year. The expenditure incurred at this time leads to poor quality works. According to the Financial Comptroller General Office (FCGO), capital expenditure was only 13.44%, or Rs 50.80 billion, in the first half of the previous fiscal year. Since the adoption of the new constitution, no government has been able to prioritize increasing capital expenditure. There is very little spending in the first six months of the financial year, and often the entire allocated budget is not spent by the end of the year. Only 14.4% of the capital budget was spent in the first six months of 2020/22. Data shows capital expenditure over the last six years has been extremely disappointing. Economists are expressing concerns that the development budget is not being spent in a timely manner and that it is contributing to the current economic crisis. In the fiscal year 2021/22, the government could spend only Rs 227.73 billion out of the Rs 352.91 billion allocated for capital expenditure. In 2020/21, the government allocated a capital budget of Rs 408 billion, but only Rs 189 billion, or 46.34%, was spent. In 2019/20, out of the Rs 314 billion capital budget, Rs 241.56 billion, or 76.93%, was spent. In 2018/19, the government managed to spend Rs 270.71 billion of the allocated Rs 335.16 billion. This was nearly 81% of the targeted capital spending. The government has allocated a budget of Rs 380.38 billion for development spending for the current fiscal year. It is estimated that capital spending will suffer this year as well. Economists argue that capital spending is not picking up the failure to prepare a work calendar. Even though the Ministry of Finance has been giving authorization for spending on the first day of the fiscal year i.e. mid-July, the concerned ministries and departments have been found deploying the budget rather late. relevant Ministries and Departments sent it to the field late, but could not capitalize on it. Devkota points out that the budget is allocated even before completing the feasibility study. This also affects spending, he added. Economist Dr Dilliraj Khanal sees problems in project preparation. "There are problems with budgeting, allocation of resources, planning, and project sector policy formulation," said Khanal. "The expenditure will not increase until the problem of sectoral priorities and targets is solved," he added. The problem in project execution still persists even though there is a gap of 45 days between allocation and authorization. The government announces fiscal budget at May-end and gives spending authorization from mid-July. Earlier, the budget would be released rather late. These days, however, the budget can be released from the first day of the fiscal year. In order to improve expenditure, Dr Khanal underlined the need to prepare an action plan by setting targets, reviewing daily performance, and putting in place work performance indicators. The slow public spending is due to a lack of transparency in expenditure, said Khanal. "Construction entrepreneurs are showing negligence as wrongdoers are never punished. Unaccounted expenditure is rising, and so is the trend of abusing resources. There is a lack of check and balance,” he said, adding that if the budget is implemented with an emphasis on good governance, capital expenditure will increase.
